New worries appear in the Australian economy

Although retail sales rose in May, the global economic crisis is now making its presence felt in Australia.

Other data, released yesterday, showed building approvals plunging 12.5 per cent in May and manufacturing activity continuing to weaken.

The Roy Morgan organisation, though, produced the most disturbing figures.  These showed Australia’s unemployment rising  by 37,000 in June, to 862,000.

It said, also, that another 967,00 Australians are currently underemployed.

The Treasurer, Wayne Swan, though, described the retail sales figures as “very encouraging.”

“Retail sales in May are up 1 per cent,” Mr Swan told reporters in the Brisbane suburb of Nundah.

“They’re  up something like 5.9 per cent since last November.”

However  big questions remain.

How much of this is due to government stimulation measures and how long can all that last?

The latest round of tax cuts, which went into effect yesterday, might not be all that much help, in the government’s pursuit of economic recovery.

A radio interviewer, Mike Carlton, asked why rich people, like himself and Mr Swan, would be getting cuts of $41 a week, while ordinary wage earners would have to make do with just $2.88 a week.

That’s an important question.  As economists say, the rich have a lower propensity to spend than the rest of us.

So they are likely to save  big slices of their tax cuts, taking that money out of the economy, at least for the time being.

As always, Mr Swan had a ready answer.

He said the new financial year’s tax cuts must be assessed along  with others granted last year.

The two, combined, added up to very substantial tax cuts for Australians on lower incomes, Mr Swan said.